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M is a multinational IT company with headquarters in Asia and with operations in all continents.

It is now trying to expand its operations in Europe. This is seen as a major challenge as the European market is very well developed with established players in fierce competition against each other.

As well as developing and producing its own products, it sources products across Asia, America and Europe as part of infrastructure deals which have to include as much of its own equipment as possible. In doing this, transfer prices can be set in YEN, USD, EURO, GBP. Transfer prices are revised every month in line with production times as most goods are made on short order times with sales cycles running at 3-4 months.

The longer sales cycle against committed transfer pricing presents problems as customers expect quotes to be valid for 90 days whereas M's suppliers reserve the right to revise pricing at the end of every month with quotes only valid for 8 days in the following month.

How should M deal with this problem?

A.

Use a centralised treasury function to set up unilateral netting so that all trades can be balanced off against each other before any money is transferred.

B.

Offer a small discount for any customers who pay in M's home currency.

C.

Do nothing, everyone is in the same situation.

D.

Incentivise sales persons to be more accurate when forecasting prices.

SQH manufactures mobile phones SQH's Board is currently undertaking a long-term planning exercise as part of the process of strategy development The Board is considering expanding the number of countries it currently exports products to.

Which THREE of the following could cause difficulty in forecasting accurately'?

A.

Currency changes in new and existing markets

B.

Competitors will have a better understanding of potential new markets

C.

Rapidly changing mobile phone technology.

D.

Pressures on management to achieve short-term results

E.

Long-term trends may be difficult to predict in this market

The list below has duties performed by risk managers and internal auditors. Show who would carry out the duties assuming the company has both risk managers and internal auditors.

CVB is a major chain of pharmaceutical retailers that is quoted on its home stock exchange.

CVB's Chief Executive Officer (CEO) persuaded a former school friend to join CVB's Board as Non-executive Chair It is not widely known that the two have been lifelong friends. The Chair tends to defer to the CEO on all matters arising at Board meetings

Which of the following statements are correct?

Select ALL that apply.

A.

The Chair should have declared an interest and refused this appointment

B.

The presence of the other non-executives will ensure sound governance

C.

CVB's shareholders are likely to be misled over the quality of governance

D.

This friendship does not matter because the CEO and Chair would become friends anyway

E.

There will be a major corporate scandal relating to CVB

Which of the following are true of an effective risk management culture?

A.

Staff should be penalised for being associated with negative events.

B.

All risk should be eliminated.

C.

Responsibility for risk management should be devolved to a risk manager.

D.

All staff should be aware of risks affecting the entity.

E.

Risk management should be regarded as part of the overall business strategy.

F.

The directors should take an active interest in risk management.

Which of the following statements are true of residual risk?

A.

Residual risk has to be accepted.

B.

Residual risk is the risk that remains after risk mitigation has taken place.

C.

If residual risk is too great then the company should not expose itself to the risk situation.

D.

Residual risk may be accepted if management feels the company can bear the risk.

E.

Residual risk should never be accepted.

COM is a well established company in the construction industry The company was founded by the Mac family 30 years ago and several family members still serve on the Board The company obtained a listing five years ago The Board has an appropriate balance between executive and non-executive members It also has audit remuneration and nomination committees The average age of board members is 68

COM is profitable but profit margins have been falling steadily and this year's revenues are lower than it was achieved last year The Board recognis thai it does not have a long term strategy in place and has been losing business to newer, more aggressive competitors

Which THREE of the following statements are correct?

A.

The remuneration committee should consider incentives such as share options to encourage the Board to focus on COM's long term strategy

B.

The nomination committee should have had a succession plan in place for directors.

C.

The nomination committee should be operating for the benefit of the directors.

D.

The audit committee should have alerted the Board to the impact of falling profit margins

E.

The non-executive directors should have challenged the lack of long term strategic planning

In relation to the use of the adjusted present value (APV) technique, which of the following statements are correct?

A.

To apply APV, the proportions of debt and equity in the capital structure must be known.

B.

To apply APV the actual amounts of debt and equity in the capital structure must be known.

C.

The interest tax shield on the project's debt must be known, or at least estimated.

D.

The weighted average cost of capital - net present value technique and the APV technique will, if applied correctly, give the same answer.

R is a manufacturer of biscuits. The market for biscuits is extremely competitive with many companies competing for contracts with large supermarkets. The intensity of the competition means that prices are kept low; and the buyers can demand higher levels of quality, and greater flexibility in supply arrangements.

Which of the following represent ways that the use of an Information System could help R to win and retain supermarket contracts in such a competitive market?

A.

It could facilitate product ordering and selection by the use of Electronic Data Interchange.

B.

If R's system is integrated with that of a particular supermarket, then this will make it more expensive for the supermarket to change to a different supplier.

C.

It would mean that R's products would be more prominently displayed on the supermarket shelves.

D.

It could be used to facilitate more timely and accurate delivery which would minimising waste.

E.

If R's system is integrated to that of a particular supermarket then other supplier's systems cannot also be integrated to that supermarket system.

B is a family run security company with a number of prestigious clients who rely on it to maintain online access to their CCTV and alarm systems and respond to any detected intrusions or malfunctions.

It designs and installs security systems for a number of UHNW (Ultra High Net Worth) individuals who may have several seasonal and city residences largely unoccupied for many months of the year.

B's reputation as 100% secure is crucial to its on-going success in this very specialised marketplace.

Select THREE factors which should be given prominence in B's fraud risk management strategy.

A.

B should carry out background security, health and financial checks on all employees, their immediate family members and associates on an annual basis.

B.

B should ask new employees to fill in a declaration that they are honest and have no criminal convictions for dishonesty. That can be filed as evidence that the company took this precaution.

C.

B should inform clients that they have a stringent anti-fraud policy.

D.

B should have an active whistle-blower policy whereby all staff are encouraged by positive reward to report any suspicions they may have about other employees.

E.

B should ensure that employees who design or install security systems are not involved with the operation of those systems once implemented.

F.

B Should revise and publish their fraud policy document to employees every three months, highlighting any new elements and industry developments.